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Kevin O'Flaherty

In this article, we discuss your rights in an Illinois foreclosure and answer the following questions:

  • What are Loss Mitigation Rights in a foreclosure?
  • Is my lender legally required to send me notices during the foreclosure process?
  • What is the Right to Reinstate in a foreclosure?
  • What other rights do I have in a foreclosure?

What Are Loss Mitigation Rights in a Foreclosure?

In a previous article titled “How Does an Illinois Foreclosure Work” we briefly touched on Loss Mitigation options. Loss Mitigation is a general term for options to avoid foreclosure. Loss mitigation rights are mostly covered under federal law, but generally, lenders are required to inform you of your loss mitigation options whether you ask about them or not. Lenders must contact, or make a good faith attempt to contact, you by phone no later than 36 days after a missed payment and every 36 days thereafter for each delinquent payment. Lenders must also inform you of loss mitigation options in writing no later than 45 days after the first missed payment. Working with the lender early on in the foreclosure process can help many homeowners avoid unnecessary stress and financial headaches. Some common loss mitigation options include:

  • Short sales;
  • Repayment plans;
  • Forbearance;
  • Loan modification;
  • Deeds-in-lieu of foreclosure;
  • Consent foreclosure; and
  • Bankruptcy

The type of loss mitigation options available ultimately depend on the type of loan, what lender the loan is through, and if the loan is insured through a federal program.

Is My Lender Legally Required To Send Me Notices During The Foreclosure Process?

Yes. Throughout the foreclosure process, the lender must send you certain notices informing you of where you are in the foreclosure process and what options may be available to you. It would be considered illegal or at least grounds for dismissal or postponing the foreclosure if you missed payments and the lender suddenly informed you that your house was going up for foreclosure auction that day. One such notice is the “breach letter,” which serves to inform you the loan is in default and that the lender has the legal option to accelerate the loan unless you cure the default and avoid foreclosure.

Another primary notice you’ll receive is the notice of pending foreclosure. Foreclosures come in two styles: judicial and non-judicial. The primary difference being judicial foreclosures must go through a court process with a judge approving the foreclosure while a nonjudicial foreclosure can proceed all the way to the auction of the foreclosed property without court involvement. For example, Illinois is a judicial foreclosure state, so the delinquent homeowner can expect to receive a complaint and summons informing them the foreclosure process has started, while in Iowa foreclosures can proceed as judicial or nonjudicial depending on how the mortgage was structured.

With nonjudicial foreclosure, the lender will usually send a notice of default to the homeowner giving the homeowner a period of time to bring the loan current. Further into the foreclosure process, the homeowner will receive a notice of sale telling them when the home is set to be sold at auction.

What is the Right To Reinstate In a Foreclosure?

In certain states, such as Illinois, homeowners in foreclosure have the right to bring their loan current by paying one lump sum that covers all the missed payments, fees, and any other associated costs for the lender. The reinstatement period usually has a specific deadline, such as 6 p.m. on the last business day before the date of the auction. Most mortgages and deeds of trust also contain a clause describing the reinstatement process and timeline. You can check your mortgage documents for a heading such as “Borrower’s Right to Reinstate” to find more information.

If the mortgage contract or deed of trust does not list a right to reinstate you can still discuss the option with your lender or ask the judge in your foreclosure case to grant you the option for reinstatement. Reinstatement is typically in the best interest of all parties involved if you have the money to get current on your loan and pay any other fees accrued during the foreclosure process.

What Other Rights Do I Have In a Foreclosure?

Whether in a judicial or nonjudicial foreclosure state, as a homeowner you have many other rights in the foreclosure process, including:

  • The Right To Redeem - The right to redeem and a redemption period are available to all borrowers under federal and state law. You can “redeem” a home before the sale by paying off the loan in full and any other costs and fees accrued during the foreclosure process. The redemption period occurs after the sale of the home and varies from state to state, but involves the borrower either paying off the entire loan and any accrued fees and costs or reimbursing the party that bought the property at the foreclosure sale.
  • The Right to Foreclosure Mediation - All states have some kind of foreclosure mediation program, and this information is typically communicated to the borrower via phone or sent in the mail. The goal of foreclosure mediation is to bring the lender and the borrower together to work out a solution to avoid foreclosure.
  • The Right to Challenge the Foreclosure - The borrower has the right to challenge the foreclosure in court. In judicial foreclosure states, the foreclosure already has to go through a court process with the borrower as the defendant, so there are no extra steps in the challenge process. However, in nonjudicial states, the borrower would have to bring a lawsuit against the lender in order to challenge the foreclosure in court. Unless the loan servicer made a mistake or proper notice was not given during the foreclosure process it’s unlikely the borrower would win a challenge against the foreclosure.
  • Right To a Surplus - In certain situations, if the sale of the foreclosure property brought in enough money to cover the loan and any other costs and fees accrued by the lender in the foreclosure process and there was some money left over, the borrower may be entitled to the excess proceeds, also known as the “surplus.” Illinois does allow a borrower to collect the surplus from a foreclosure sale, but doing so will finalize the foreclosure process and end any chance of getting the home back outside of suddenly having enough cash to buy it outright. However, the right to collect a surplus swings both ways and if the foreclosure sale of the property does not generate enough cash to cover the loan and other costs, the lender may seek a deficiency judgment against the borrower, requiring the borrower to pay some or all of the difference.

If you have any questions about foreclosures and your rights don’t hesitate to give us a call at 630-324-666.

Disclaimer: The information provided on this blog is intended for general informational purposes only and should not be construed as legal advice on any subject matter. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship. Each individual's legal needs are unique, and these materials may not be applicable to your legal situation. Always seek the advice of a competent attorney with any questions you may have regarding a legal issue. Do not disregard professional legal advice or delay in seeking it because of something you have read on this blog.


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